Today the global economy is facing down the threat of a multifaceted crisis. Sustained by ultra-low interest rates and unprecedented levels of quantitative easing since the last global financial crisis, the global economy is taking a sharp turn toward tighter monetary policy as it experiences rampant inflation (in some countries at a 40-year high). As the economy has yet to recover fully from the impact of the COVID-19 pandemic, this has produced a looming threat of a recession and led to uncertainties stemming from soaring interest rates amid record highs in debt. On the other hand, the intensifying US-China rivalry for global hegemony — recently put on full display in Washington’s new national security strategy, its sanctions on semiconductor exports to China, and the Chinese Communist Party (CCP)’s latest congress — poses additional, grave threats to the global economy. The continuing antagonism between the G2 countries will exert an impact beyond a simple decoupling of the two economies: it threatens to destabilize the global trade environment. Amid all this, climate change continues to add to the long-term risks faced by the global economy. Most importantly, all these disruptive factors can interact with one another to produce results that are far more difficult to predict and even more devastating. A global recession and ever-higher interest rates will adversely affect long-term investment in the energy transition, while the intensifying US-China rivalry also stands in the way of encouraging globally-concerted efforts to fight and mitigate climate change. The longer the delay in the global response, the greater the inevitable cost of climate change.

All these changes pose a great threat to the Korean economy. The threat of a global recession and soaring interest rates at home and abroad run obvious short-term risks. Even more dangerous, however, are the midto long-term changes likely to stem from the US-China fallout. The escalating tension between these two powerful nations threatens to occasion a major setback for the second wave of globalization and the global free trade regime from which the export-oriented Korean economy has benefitted handsomely. Heavily dependent on trade, particularly with both the United States and China, the South Korean economy may soon face a perfect storm. The threat of a new US-China Cold War even poses the possibility that the Korean Peninsula may again become a key battleground, amid the depending confrontation between South Korea, the United States and Japan and North Korea, China, and Russia. Koreans need not be reminded of the immense toll they paid in blood and treasure when the last Cold War went hot.

Responding to this polycrisis requires differentiated policies designed to specifically address multiple aspects of the crises at hand. Short-term threats require timely and flexible responses based on thorough monitoring. Mid- to long-term risks require us to first establish an overall strategy, and then to devise individual measures within such a framework. It is also crucial to ensure consistency and momentum in execution by making strategic decisions based on nationwide consensus.